Saturday, October 4, 2014

The Paris Auto show is usually a time to celebrate new
models, show off prototypes, and generally be in a good mood about what each
car maker has done, and even what the industry has done. It is hard to be
really upset during such a "celebrate and show off" occasion. Yet this year the
CEOs of Daimler and Renault-Nissan attacked Toyota’s plans to launch a new line
of environmentally friendly cars based on fuel cell (hydrogen) technology, with
Ghosn of Renault-Nissan asking "How are you going to market these cars?"

Funny question, that one. One would think that marketing a
car would be Toyota’s problem, and that Renault-Nissan would not be worried about
the marketing being difficult, or even impossible. Toyota’s loss would be Renault-Nissan’s
gain, right? Toyota responded that Toyota had introduced new technologies
before, an unsubtle reminder that Toyota came up with the Prius while European
car makers thought that diesel was the path toward environmentally friendly
driving.

To see the reason for the conflict, one has to realize that
auto makers that are not alliance partners, like Toyota, Daimler, and
Renault-Nissan, sometimes act together in order to advance technologies that
they all depend on. Through legal requirements they are being pushed to produce
zero-emission vehicles, especially in the important California market, which
they are currently addressing through making electrical cars. But electrical
cars are hard to market, in large part because there are too few recharging (not
refueling) stations around. In order for electric cars to succeed, the car
makers are strongly dependent on the state of California and others to make good
recharging networks for them.

For a while, Toyota has been playing along with the others.
Although their skepticism of electric cars is well known, they finally made a rechargeable
version of the Prius (but not until the third generation model…), so one can
now drive a Prius without ever starting its gasoline if buying the plug-in
version. Yes, it is a special version; a regular Prius cannot be recharged,
only refueled. But Toyota isn’t satisfied, and it isn’t particularly concerned
about hurt feelings among other car makers. It thinks fuel cells are the way forward,
even though that technology is difficult to master and also requires a network
of refueling (with gas) stations.

So the critiques of Toyota are based on its lack of
cooperation with other car makers in pushing for recharging networks to be
made. In the short run, this makes marketing of electrical vehicles harder. In
the long run, if Toyota should succeed with the fuel cell technology (far from
a sure thing), it would undercut the entire electrical vehicle market. This is a kind of situation that often occurs when industry participants are locked in competitive battles and lobbying efforts together, and it is a situation that we still do not understand well enough through research. Nor are the firms good at handling it. The
Daimler CEO was clearest in expressing what they thought Toyota should do about
no-emission vehicles: "we have to set the stage for this industry change
together." Good idea, except that Toyota remembers that car makers compete and
that Toyota has won with new technology once before.